Source: Costco.

Before Costco Wholesale (NASDAQ:COST) announced its fiscal fourth-quarter and full-year results this morning, many investors worried that the warehouse retailer might continue its streak of disappointments with its earnings releases. But shareholders breathed a sigh of relief as Costco gave investors cause to celebrate, with impressive growth in earnings that proved that the company is working hard at making the most of its revenue growth. As the key holiday season approaches, Costco hopes that its recent success will translate into even better times ahead.

The surprising strength in Costco's earnings
Some of Costco's results came as no surprise to attentive investors, as the company had pre-announced sales results early last month for the quarter. Costco confirmed that sales jumped 9%, and for the full year, that left the company with revenue of $112.6 billion, just inching past the $112.5 billion consensus figure among investors and representing 7% growth for the fiscal year. Comparable sales gains came in at 6% for the quarter and 4% for the year, with currency impacts and gasoline price decreases cutting one to two percentage points from those comps.

What investors found out for the first time, though, were figures on Costco's net income for the quarter, and they were impressive. Net income jumped 13%, pushing earnings per share to $1.58, or about $0.06 per share more than most investors had expected to see. For the full fiscal year, Costco earned $2.06 billion, about 1% higher than last year's earnings before adjusting for a one-time tax benefit. Membership fees continued to play a vital role in Costco's overall growth, with fee revenue climbing 7% to $768 million for the quarter and $2.43 billion for the full fiscal year.

One slight concern came from Costco's sales figures for the month of September, which weren't as strong as its August-quarter results. Overall, revenue climbed 7% compared to September 2013, but comparable sales of just 4% were slightly weaker than in previous months. In particular, international comp growth fell to just 2%, although currency and gasoline-price pressures were especially tough during the month and pulled the international number down by four full percentage points. Most investors focused instead on adjusted figures, which at 6% were more in line with past results. Once adverse currency movements get less severe, Costco should see its financials from its overseas operations improve.

Source: Wikimedia Commons.

How Costco expects to keep growing
With its ongoing expansion, Costco now boasts 664 warehouse locations in nine countries. The vast majority of those locations are located in North America, but Costco's efforts to get bigger footholds in the Asia-Pacific region and in Europe are starting to gain momentum. By the end of the calendar year, Costco expects to add another eight locations, keeping up the pace of its past growth in store counts.

More importantly, Costco appears to be generating positive momentum as the holiday season approaches. Costco is growing at a faster pace than the overall retail and food-services sectors, and many of its big-box competitors have struggled with the increasing challenges of heavy promotional discounting and greater competition from online retail. Sears Holdings (OTC:SHLDQ) in particular has seen its traditional-retail business continue to deteriorate, and even industry behemoth Wal-Mart (NYSE:WMT) hasn't been able to generate much upward movement from its recent results. Tapping into favorable future trends will be important, with figures from the National Retail Foundation predicting that holiday sales for the U.S. economy will rise by more than 4% this year. Costco hopes to claim its share of higher traffic and buying activity.

Costco stock responded favorably to the company's earnings news, climbing 2.5% in premarket trading as of 8:30 a.m. EDT. Investors apparently believe that the solid results that the warehouse retailer has created will continue into the future, and with its past record of outperforming its competition, Costco has every chance of doing so during the current quarter and beyond.